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U.S. Economy Is Still Holding On

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The US economy is continuing to hold on despite the recent economic uncertainty; there have been signs of modest growth in a few sectors with others showing little to no change.

U.S. Economy Today

The U.S. economy appears to be holding strong despite fears following the Brexit referendum result last month.

The economy has shown signs of modest growth in several areas such as employment, manufacturing, and real estate.

1

• The US dollar currency index closed at 96.10, which is down 0.21 from the previous close of 96.31.

The US dollar is rising against the:
• Euro +0.21%
• Great British Pound +0.68%
• Australian Dollar +0.50%
• Japanese Yen +1.34%

2

Growth In Employment

The U.S. employment rate has been holding steady for the last few months:

3

Reports are showing that the unemployment rate has been holding steady at 254,000, which is near the 43-year low of 248,000.

This is going against the predictions set by economists who saw the unemployment figure to be nearer 265,000.

Unemployment figures have now been below 3000,000 for 71 weeks; the longest stretch recorded since 1973.

Housing Expected To Hold Steady

The housing market has shown a quarter on quarter rise of 0.6%.

4

Regionally there have been strong signs of growth in the West, Midwest, and South.

However, in the Northeast, there has been little sign of growth, which is concerning housing experts.

Overall experts predict that the housing market will slow down to a steady pace during the second half of 2016.

Stock Markets Rising High

The U.S. stock market closed high all of last week, which has pleased economists and investors, after the markets took a hit following the Brexit referendum result.

Now, the markets are showing significant signs of growth worldwide with only losses in the FTSE 100, SHCOMP, and SENSEX.

Worldwide the biggest growth is:
• FTSE MID +1.83%
• BOVESPA +1.63%
• DAX 30 +1.14%
• NIKKEI 225 +0.95%

5

Why U.S. Growth Can Be Bad News

The increase of the U.S. economy should be a good thing; however, some economists fear that the growing U.S. economy could trigger another recession.

Investors did not anticipate the U.S. economy to hold high, so therefore did not foresee the potential losses because of a continuing growing economy.

So why would U.S. economic growth trigger a recession?

Continuing growth would result in interest rates rising, and an increase in interest rates would mean an increase in borrowing.

This would disturb low-interest rate investments.

The yield curve on US treasuries has appeared in recent months, which is an indicator of an imminent recession.

If the US economy continues to soar, then this would cause the yield curve to decompress which would send shockwaves across the economy rapidly.

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How likely is it that interest rates will raise?

Neel Kashkari, Fed’s Minneapolis president, has stated that there is not likely to be any interest rate risings shortly.

Despite the economy showing signs of growth, inflation is still low, and employment rates are not full.

Kashkari said that the Fed will be patient and will allow the US economy to continue to heal before considering raising rates.

The Fed will be meeting at the end of the month; they will be paying close attention to the current growth in the job market amongst other areas to determine if the economy is heading in the right track.

Kashkari is confident that the economy will keep on to growing at a stable pace and that there will be no further recession.

He feels that their most urgent priority is getting people back into employment.

Traders are not expecting to see interests rates rise until mid-2017.

The Future Of The U.S. Economy 

The U.S. economy has proven to be resilient; however, the continual growth of the US economy depends on the job markets continuing to improve, productivity starting to strengthen, and addressing high poverty rates, and low incomes.

Despite the dollar remaining strong, oil investments are sinking as prices fell, and distress in the global financial markets, the IMF predict that the growth this year will be 2.2.

Furthermore, there are predictions that growth will continue into next year with the figure rising to 2.5.

The main risks that may weaken the economy lie with uncertainty surrounding a strong dollar, corporate production and investments, and inflation.

Other risks factors include the oil and energy industries.

 The IMF feels that the US top priorities should be:
• Increase the minimum wage and expand earned income tax
• Reform the corporate tax
• Immigration reform to skill based system
• The growth in state and federal infrastructure
• Improve nonworking social programs
• Promote family generous benefits
• Increased funding for training programs and education
• Endorse the Trans-Pacific Partnership

Conclusion

Despite the recent unrest and uncertainty recently both inside and outside the U.S., the economy has proven to be resilient and has continued to hold strong and show signs of improvement.

The employment and housing markets have continued to show signs of slow and steady growth, with indications that this trend will continue throughout the rest of 2016.

The stock market has shown incredible resistance to the current economic mood and closed high all of last week, despite the sudden dip after the result of the UK EU membership referendum.

The global stock markets also show signs of growth with only the FTSE 100, SHCOMP, and SENSEX showing decline.

There is fear that continued growth could spark another recession if the economy increases too quickly.

If interest rates were to rise too soon then, this could trigger a series of events that could cause the economy to collapse and fall into recession.

Neel Kashkari, of the Fed, has stated that the Fed is in no hurry to increase interest rates anytime soon.

The Fed wants to allow the economy to heal itself.

They will not raise interest rates until inflation and employment rates improve.

Continual economic growth will rely on several areas being developed along with avoiding potential risks which may affect growth.

The IMF has predicted that growth will continue into 2017, and they have issues several priorities, on which the US economy should focus.

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